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Buffett Knew When To Fold 'Em-Now What? By Spencer Jakab

After Monday's tumble put U.S. stocks on pace for their worst April since (gulp) the Great Depression, today could bring something of a reprieve based on futures prices. Treasury yields are still creeping higher, though, and gold hit a fresh record high.

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When Warren Buffett hosts "Woodstock for Capitalists" 11 days from now, he'll have replaced one pesky question with another.

Berkshire Hathaway holds more cash than any company in history: about $318 billion. Much of it piled up the old-fashioned way, flowing from the conglomerate's subsidiaries and investments. That got turbocharged last year when Berkshire sold a chunk of its stock portfolio-notably Apple.

The gigantic bet had made some investors nervous . Now that the iPhone maker has lost $1 trillion in market value since its December peak, Buffett looks prescient.

But is his massive cash hoard part of a grand plan? Does Buffett anticipate the economy getting so bad that Berkshire can earn another bonanza snapping up and bailing out blue chips, as during the financial crisis?

First it helps to understand why he probably sold Apple. Berkshire's stake, which it began building in 2016, to some investors' discomfort, became massive-probably the most lucrative single-stock investment of all time.

It wasn't the first time Buffett's investors second-guessed an aggressive bet on what seemed like a fully priced stock. Between 1988 and 1994 Berkshire made what was then its largest ever investment in Coca-Cola. By 1998 it had appreciated tenfold, yet he held on. Buffett said years later that he regretted not selling.

"It was a really wonderful business that sold at a very silly price."

He heaped similar praise on Apple and its CEO, Tim Cook, but the Coke experience probably influenced his thinking, says Adam J. Mead, author of " The Complete Financial History of Berkshire Hathaway ."

With markets wobbling and a recession possible, the resulting cash pile has benefited Berkshire investors: Its stock is beating the S&P 500 by nearly 25 percentage points this year. Unleashing that cash is complicated, though.

"His opportunity set is pretty small," says newsletter writer Alex Morris, author of " Buffett And Munger Unscripted ." With a market value over $1 trillion, it takes a lot to move the needle.

Back in 2009 Berkshire bought Burlington Northern Santa Fe, America's largest railroad by revenue, its largest-ever acquisition . Today that deal would be just 2.5% of Berkshire's value.

What about the sort of lucrative lifelines Berkshire extended to blue chips Goldman Sachs, Bank of America and Dow Chemical during the financial crisis, should similar opportunities arise?

"They'd have to be significantly larger to make a dent," says Morris.

And, with his Treasury bills at least paying something in interest now, sitting still is less painful.

Buffett is famously fearful when others are greedy, and vice versa. Viewing his cash buildup as a statement that nothing is worth buying for those of us with smaller bankrolls either is probably wrong, though.

He knew when to sell. Buying is just harder now.

Stocks I'm Watching

Tesla : The electric-vehicle maker will report results after markets close. Analysts expect a year-over-year drop in profit, FactSet estimates show. Tesla stock, which has fallen 44% this year through Monday, ticked up slightly premarket.

Novo Nordisk : Shares of the Ozempic maker fell more than 7% in the first trading session since rival Eli Lilly said its experimental weight-loss pill helped diabetes patients lower blood sugar and lose weight .

Hertz Global : Shares in the rental-car company fell more than 7% premarket, following a 5% drop Monday. The company's stock rallied sharply last week after hedge-fund manager Bill Ackman's firm disclosed a large stake .

L'Oréal : Shares of the French cosmetics company rose 3% in its first trading session since reporting higher quarterly sales . Its chief executive said the company could raise prices and relocate some production in response to U.S. tariffs.

MicroStrategy , Coinbase : Cryptocurrency-linked stocks advanced premarket as bitcoin's price climbed above $88,000. Bitcoin hasn't settled above that level since late March.

GE Aerospace , 3M , RTX and Lockheed Martin will report earnings Tuesday morning.

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About Me

My name is Spencer Jakab and I've been musing about money and markets for more than 30 years, including editing The Wall Street Journal's Heard on the Street column for a decade, writing two investing books and running a team of stock analysts at a global investment bank.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

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April 22, 2025 06:41 ET (10:41 GMT)

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